Question

A & B enter into a joint venture to partially underwrite shares of K Ltd. K Ltd make an equity issue of 2,00,000 equity shares. $80\%$ of the shares underwritten by the venturer. 1,60,000 shares are subscribed by the public. How many shares are to be subscribed by the venturer?

• A. Nil
• B. 32,000 shares
• C. 36,000 shares
• D. 40,000 shares

Answer 1

The correct option is A Nil

It is given that the issue was partially underwritten by A & B to the extent of 80% of the issue i.e. 2,00,000 * 80% = 1,60,000 equity shares. And since 1,60,000 equity shares were subscribed by the public also, there is no shortfall and hence, no liability on the underwriters. Therefore, the answer is "Nil".

Total Issue: 2,00,000 equity shares

Underwriters (Gross Liability): 2,00,000 * 80% = 1,60,000 equity shares

Less : Subscribed by public = (1,60,000) equity shares

Underwriters ( Net Liability) = Nil